Skip to main content

Posts

Showing posts from 2007

Behind the "Global Savings Glut"

A recent article in The Arab Times seems to shed some light on where all the money sloshing around the world creating asset bubbles is coming from:

We in Kuwait seem to have run out of ideas for the time being and our past generations were more creative and looked deeper into our human resources to give their best. The overseas investments have their limits and it is time to seriously think of ways of making and creating new job opportunities for our youngsters and improve their capabilities and abilities. This is the only way to move forward as our financial resources are beyond our abilities and capabilities. It may take some time to come with the right answers but this will not happen without passing some laws through our parliament. Most importantly the land utilization law and liberalization laws to allow the private sector to move forward. The government owns more than 95 percent of the Kuwaiti land and with the BOT law still under revision almost all projects have been shelved a…

The Super SIV? Will it work or are there one too many holes in the dike.

The Super SIV appears to be on it's way to sanitize all the sub-prime CDOs.

Will it work?

Probably Not... Why?





Hole in the Dike #1:

The Chinese and the Japanese aren't buying it anymore as outflows of capital show:

Asian Investors Dumping Treasuries

Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said.


















See that chart above? That's the August data, before they lowered rates!

Hole in the Dike #2:

The worst isn't even here yet! See below for a timeline of when rate resets are going to hit. It starts in January 2007.

















No foreigners want to buy our debt and there are going to be a ton of people defaulting on their mortgages in the coming months. So all th…

The Big Sub-Prime Bailout Game

It seems that everybody is trying to sort out the justice of the situation. People see empty neighborhoods with unkempt lawns and they want to help, it's only natural.

Bush: Nobody did anything wrong, there's just a confidence crisis keeping people from being able to re-fi. In this sense, this is the most blissfully academic conventional macro solution because it looks at the whole situation as composed of undifferentiated perfectly uniform economic quantities like interest rates and monthly payments.

Bernanke: Bernanke thinks that again no one should pay it's just that whoever bought the MBS paper got too smart and got scared and we need to add more complexity to get the con-job started again.

Obama: Think that obviously it's the financial industry that is to blame. He is right about the perpetrator but wrong about the victim. The borrower got to live in a nice house they would never be able to otherwise afford for a couple months and got tons of money for toys via …